Issue 1

Volume 9 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Spring 2000

Intermediation Can Replace Certification

Paolo G. Garella and Martin Peitz
We consider a market in which consumers do not have perfect information about product quality. Producers can perfectly reveal that a good is of high quality through certification, which entails socially wasteful costs. Firms can choose whether to sell through an intermediary or to sell independently (vertical integration).

Systems Competition, Vertical Merger, and Foreclosure

Jeffrey Church and Neil Gandal
We address the possibility of foreclosure in markets where the final good consists of a system composed of a hardware good and complementary software and the value of the system depends on the availability of software. Foreclosure occurs when a hardware firm merges with a software firm and the integrated firm makes its software incompatible with a rival technology or system.

Price and Nonprice Competition with Endogenous Market Structure

George Symeonidis
This paper examines the effect of the intensity of short-run price competition and other exogenous variables that affect gross profit margins—such as the degree of product differentiation and the consumers' responsiveness to quality—on market structure and on advertising and R&D expenditure.

Contract Mixing in Franchising as a Mechanism for Public-Good Provision

Chong-En Bai and Zhigang Tao
This paper is concerned with the coexistence of company-owned units and franchised units in business format franchising and their different contractual arrangements. Drawing insights from case studies that indicate both the development and the maintenance of company-wide brand names and unit-specific sales activities are crucial to a franchise company, we construct a multitask model to account for such contract mixing in franchising.

The Effect of Organizational form on Information Flow and Decision Quality: Informational Cascades in Group Decision Making

Steve L. Slezak and Naveen Khanna
This paper identifies a disadvantage to decision making in a team. We show that in some cases available information is lost due to sequential communication that results in informational cascades. Although incentive contracts exist that prevent cascades, in some cases these contracts do not maximize shareholders' expected residual value and cascades are tolerated in equilibrium.